Friend of mine went long the XIV with no stop..... Also holds other stocks through same brokerage. Questrade asking for 20K margin call. Total loss on the XIV was +33K.... Why didn't Questrade sell the position during aftermarket trading, or extended market hours subsequent to that, when the position put the total account into a net deficit? I realize it's the traders responsibility, but Questrade (and other brokers), had the opportunity to liquidate XIV positions here on the downswing during aftermarket trading, but chose not too. What's the sense in this? Is there anything that can be done similar to the Flash crash "busted trades"? The USDCHF SNB debacle and Forex brokers wiping deficits? Any "re do's" for this one??? Thanks....
It is the trader/investors responsibility - not the brokers. If he had no stop and they hold no instruction to act on his behalf then why would they? It is a lawsuit waiting to happen. He will likely lose his entire investment in XIV but should lose no more than that unless he was using additional leverage...so what has resulted in the margin call? How has he gone into a negative deficit?
Thanks for the reply. I don't know much about XIV....was unaware it was an unleveraged product..... I'm unsure if his account is in a negative balance, and if so, why. Perhaps my friend can jump in...
Does aftermarket trading even come into play on margin calls? If that’s the case it’d be pretty easy to pick some thinly traded market and make some crazy prints and watch the margin calls and liquidation’s come in. Think the issue here is that the ETN is liquidating.
HOGWASH... STUPID THINK! The broker has no financial incentive to "force your liquidation"... There is no "upside" for him, only downside if things "get out of hand". A broker's forced liquidation is to protect both itself and you... from running debits you may not be able to honor... and he's forced to make good.
And suppose it was all panic driven and back up above $60 the next day and the sold at $30? Had they liquidated under those circumstances, they would almost certainly have breached their fiduciary duty. His (your?) recourse was the coupon clipping he believed he was in, and the money he made before it all went pear-shaped. He thought he owned a money printing machine, and discovered the risk of ownership the hard way. That said, I do genuinely sympathise...I really don't think XIV is a product that can be represented accurately in disclosures, and it inherently exploits a hard-wired gap in human perception of risk and reward.
I was down over 1mil USD intraday and closed that trade with a high 6 digit loss from memory, holding RF futures. Wished someone had told me earlier about the redo, damn ! didn't receive a margin call though, not sure how it ended up for folks with negative account balance.
The redo came from firms that were taking the other side of their clients' trades. They couldn't collect anyway so they negated the debt for PR. They didn't have a liability on the otherside to fulfill so they incurred no real loss in the end.
Because like most people, Questrade had no idea XIV was entering a termination event. It is not their responsibility to liquidate.
I assume he was trading leveraged... which means his initial positions totalled more than he had funds in the account. Most brokers that allow this type of trading usually first give out margin calls and depending on the state of the market they might end up liquidating part or all of the position... if one of the products held drop significantly in a short period of time, they might not be able to get in there in time... I don't know Questrade... if they need to manually liquidate, they would definitely be too late in the case with XIV. But even if it would be done automatically, that wouldn't mean it's all done in a nice and timely manner. All is the client's responsibility....